U.S. consumer confidence, battered for months by concerns about the direction of the economy and a possible resurgence of inflation driven by tariffs, stabilized in one major national survey and markedly improved in the other.
The University of Michigan reported that its Consumer Confidence Index was unchanged in May, an improvement from four consecutive months of “plunging” declines. The Conference Board reported that its Consumer Confidence Index rose by 12.3 points, to 98.0, from a slightly downwardly revised 85.7 in April.
However, the Conference Board also said its Expectations Index, which is based on how survey respondents assess current business and labor market conditions, climbed by a significant 17.4 points, to 72.8. That was still well below the 80-point level, remaining in a range that typically suggests a recession is coming.
“Consumer confidence improved in May after five consecutive months of decline,” Stephanie Guichard, senior economist, global indicators, at The Conference Board, stated in a press release. “The rebound was already visible before the May 12 U.S.-China trade deal but gained momentum afterward.
“The monthly improvement was largely driven by consumer expectations, as all three components of the Expectations Index — business conditions, employment prospects and future income — rose from their April lows,” Guichard added. “Consumers were less pessimistic about business conditions and job availability over the next six months and regained optimism about future income prospects. Consumers’ assessments of the present situation also improved. However, while consumers were more positive about current business conditions than last month, their appraisal of current job availability weakened for the fifth consecutive month.”
The Conference Board also reported that the rebound in May was broad-based. It covered all age and income groups, as well as political affiliations.
“With the stock market continuing to recover in May, consumers’ outlook on stock prices improved, with 44% expecting stock prices to increase over the next 12 months (up from 37.6% in April) and 37.7% expecting stock prices to decline (down from 47.2% in April),” Guichard says. “This was one of the survey questions with the strongest improvement after the May 12 trade deal.”
On that date, the United States and China agreed to cut the steep tariffs that each had imposed on the other. The United States cut additional tariffs it had imposed on Chinese imports in April to 30% from 145%; China cut its duties on U.S. imports to 10% from 125%. The agreement was to last for 90 days.
The Conference Board reported that write-in responses to its monthly survey showed consumers were still strongly worried that tariffs would raise prices and have other negative effects. About half of the survey’s responses were received after the deal announcement.
Purchasing plans for homes, cars and vacations increased “notably” from April, the survey showed, and consumers’ plans to buy big-ticket items were also up.
Joanne Hsu, director of the University of Michigan’s Surveys of Consumers, reported that consumer sentiment “had ebbed at the preliminary reading for May, but turned a corner in the latter half of the month following the temporary pause on some tariffs on China goods.” Expected business conditions improved after mid-month, likely a consequence of the trade policy announcement.
“However, these positive changes were offset by declines in current personal finances stemming from stagnating incomes throughout May,” Hsu added. “Overall, consumers see the outlook for the economy as no worse than last month, but they remained quite worried about the future.”
Hsu said year-ahead inflation expectations among survey respondents were little changed, at 6.6%, up from 6.5% in April.
“This is the smallest increase since the election and marks the end of a four-month streak of extremely large jumps in short-run expectations,” Hsu said. “Notably, long-run inflation expectations fell back from 4.4% in April to 4.2% in May. This is the first decline seen since December 2024 and ends an unprecedented four-month sequence of increases.”
Consumer spending rose very little in April. The U.S. Department of Commerce reported that it edged up 0.2% after a 0.7% jump in March.
Inflation was minimal in April. The Personal Consumption Expenditures Price Index, the Federal Reserve’s preferred inflation gauge, rose just 0.1%.
During the 12-month period that ended in April, the index rose by just 2.1%, leaving inflation slightly above the 2.0% target the Fed has been striving to reach.
The so-called core PCE index, which strips out the volatile food and energy sectors, matched the broader index with an increase of just 0.1%.
“The increased tariffs have not yet worked their way into the consumer inflation readings, but we anticipate that the improved inflation trend will reverse in the second half of the year as companies are forced to begin passing along a portion of the increased tariffs in order to protect profit margins,” Kathy Bostjancic, chief economist at Nationwide, told Reuters.
The Conference Board reported that its Leading Economic Index fell sharply in April, declining by a full percent, to 99.4.
“The U.S. LEI registered its largest monthly decline since March 2023, when many feared the U.S. was headed into recession, which did not ultimately materialize,” Justyna Zabinska-La Monica, senior manager, business cycle indicators, at The Conference Board, stated in a press release.
“Most components of the index deteriorated,” she added. “Notably, consumers’ expectations have become continuously more pessimistic each month since January 2025, while the contribution of building permits and average working hours in manufacturing turned negative in April.”
“However, while the six-month growth rate of the LEI went deeper into negative territory, it did not fall enough to trigger the recession signal,” she added. “The Conference Board currently forecasts U.S. real GDP to grow by 1.6% in 2025, down from 2.8% in 2024, with the bulk of the impact of tariffs likely to hit the economy in Q3.”
The Commerce Department reported in late May that the U.S. gross domestic product shrank by 0.2% during the first quarter, marking the measure’s first contraction since 2022. An earlier GDP estimate had pegged the decline at an even steeper 0.3%.
Consumer spending for the quarter rose by just 1.2%, the weakest result in nearly two years.
The mood at the nation’s small businesses worsened in April. The National Federation of Independent Business reported that its Small Business Optimism Index declined by 1.6 points, to 95.8, marking the second consecutive month the gauge was below its 51-year average of 98.
The trade group’s Uncertainty Index fell by four points from March, to 92, but remained far above its historical average of 68.
“Uncertainty continues to be a major impediment for small business owners in operating their business in April, affecting everything from hiring plans to investment decisions,” NFIB chief economist Bill Dunkelberg stated in a press release. “While owners are still trying to fill a high number of current job openings, their outlook on business conditions is less supportive of future business investments.”
Nineteen percent of member business owners said labor quality was their most serious business problem, and it remained the top issue for the third month in a row.
The NFIB reported that the net percentage of member business owners who expected the economy to improve in the coming months fell to 15%, the lowest since last October.
A seasonally adjusted 34% of owners reported job openings that they could not fill in April, down by 6% from March. A net 33%, also seasonally adjusted, reported raising pay in April, down by 5% from the previous month.
Confidence among the nation’s home builders declined in May. The National Association of Home Builders reported that its NAHB/Wells Fargo Housing Market Index fell by six points, to 34, because of what the trade group said were growing uncertainties from elevated interest rates, tariff concerns, building material cost uncertainty and the “cloudy” economic outlook.
“The spring home buying season has gotten off to a slow start as persistent elevated interest rates, policy uncertainty and building material cost factors hurt builder sentiment in May,” NAHB chairman Buddy Hughes, a home builder and developer from Lexington, N.C., stated in a press release.
NAHB chief economist Robert Dietz added: “Policy uncertainty stemming in large part from the stop-and-start tariff issues has hurt builder confidence, but the initial trade arrangements with the United Kingdom and China are a welcome development. Still, the overall actions on tariffs in recent weeks have had a negative impact on builders, as 78% reported difficulties pricing their homes recently due to uncertainty around material prices.”
All three of the HMI component indexes were lower in May. The index that gauges current sales conditions fell eight points, to 37; the component that measures sales expectations in the next six months edged down by one point, to 42; and the gauge that charts the traffic of prospective buyers dropped by two points, to 23.
Any number over 50 indicates that more builders view conditions as good than poor.
Nonetheless, the Commerce Department reported that sales of new homes rose in April. Transactions climbed by 10.9% to a seasonally adjusted annual rate of 743,000 from a downwardly revised figure in March.
“The April new home sales figure appears to be an anomaly, as builder sentiment moved markedly lower in May,” Hughes stated. “A more reliable look would be the year-to-date figures, which show new home sales are down 1.2% on elevated interest rates, ongoing policy uncertainty and rising construction costs.”
Dietz added: “Rising inventory in the resale market is likely to place pressure on both pricing and sales activity for home builders during the second half of the year. The April new home data reflects this, as new home inventory is leveling off near a half million of residences marketed for sale, up just 1.6% from January.”
The government reported that the median new-home sale price in April was $407,200, down from $415,300 in the same month a year earlier.
Existing-home sales were down slightly in April. The National Association of Realtors reported that these sales dropped by 0.5% to a seasonally adjusted annual rate of 4 million.
Year over year, sales were 2% lower.
“Home sales have been at 75% of normal or pre-pandemic activity for the past three years, even with 7 million jobs added to the economy,” NAR chief economist Lawrence Yun stated in a press release. “Pent-up housing demand continues to grow, though not realized. Any meaningful decline in mortgage rates will help release this demand.”
The NAR also reported that the total housing inventory registered nationally at the end of April was 1.45 million units, up 9% from March and 20.8% from the same month a year earlier. Unsold inventory was at a 4.4-month supply at the current sales pace, up from four months in March.
The median existing home-sale price was $414,000 in April, up 1.8% from the same month a year earlier.
“At the macro level, we are still in a mild seller’s market,” Yun stated. “But with the highest inventory levels in nearly five years, consumers are in a better situation to negotiate for better deals.”
